Environmental Audit Committee

5 February 2004 Water: the Periodic Review 2004 and the Environmental Programme

5 February 2004 Water: the Periodic Review 2004 and the Environmental Programme

NEW INQUIRY

The Environmental Audit Committee last conducted an inquiry into the Periodic Review in the summer of 2000. The resultant report on that Review, Water Prices and the Environment, made a number of recommendations to improve future reviews, many of which were taken up by the parties concerned. A key point of contention in that review was the size of the environmental programme.

The Committee is concerned at recent press reports that the Government is planning large cuts in the UK water quality programme in order to mitigate the impact on customers of water price limits to be agreed in the 2004 Periodic Review. The Committee is keenly aware that a balance needs to be struck between the size of any environmental programme and price increases to customers, but is anxious that an appropriate and realistic programme may fall victim to commercial, public and political considerations, and the UK may be in danger of falling short of statutory obligations. The Chairman of the Committee, Mr Peter Ainsworth MP, has written to the Secretary of State for the Department for Environment, Food and Rural Affairs, the Rt Hon Mrs Margaret Beckett MP, to express this anxiety.

In the context of the imminently expected Government guidance, the Committee has decided to hold a short inquiry into the size and scope of the environmental programme to be included in the Periodic Review, drawing on its own work in 2000 and the recent report of the Environment, Food and Rural Affairs Select Committee, Water Pricing. The Committee is interested in hearing views from interested parties on the following:

- what should be the key components of the environmental programme allowed for in Ofwat's price limits;

- the adequacy of Environment Agency and DEFRA guidance given to date on the size and scope of the environmental programme; and

- the extent of the environmental achievements delivered as a result of the 1999 Periodic Review.

Written evidence should be sent to the Committee by
Monday 23rd February 2004, preferably by e-mail to [email protected] (with a hard copy by post). A brief guidance note on the preparation and submission of evidence is available on the Committee's web pages. For further information on the Committee's inquiry, please telephone 020-7219-5776.

DEFRA issued its document Directing the Flow: Priorities for future water policy in November 2002 and as part of the Periodic Review process: likewise, the Environment Agency issued its Environmental Drivers for the 2004 Periodic Review in September 2002.

2. Ofwat and the Periodic Review: The Office of Water Services (Ofwat) sets price limits on water companies for consumers very five years at the conclusion of a process known as the Periodic Review. The most recent Review started in October 2002 and the price limits will be announced in November 2004, coming into effect in April 2005.

In setting price limits the review process takes into account a range of factors including the need to finance a mandatory environmental investment programme set by DEFRA, the Environment Agency, and the Drinking Water Inspectorate, and the need to facilitate competition and to promote economy and efficiency in the industry.